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Squaring the Eminent Domain Circle: A New Approach to Land Assembly Problems

The prevailing land use regulation and land tax laws in the United States make the Kelo v. City of New London case and the use of eminent domain for private development particularly dramatic, especially as compared to other countries.

We propose a novel solution for "squaring the eminent domain circle" when large-scale, for-profit development projects require the assembly of land from numerous private property owners. Such anticommons situations may justify government intervention through eminent domain yet they often leave landowners under-compensated. This may skew the incentives for initiating land development projects and lead to considerable injustice.

While the taking component of eminent domain may need to remain an involuntary non-market transaction, we propose a market-based mechanism for the compensation component in the form of a Special-Purpose Development Corporation (SPDC). Offering condemnees a choice between receiving pre-project "fair market value" compensation or pro rata shares in the SPDC would make it more likely that compensation is closely linked to true economic value of the land and, consequently, that land assembly projects are both more just and genuinely social-welfare maximizing.